Bond Market Update

Pushing Higher Ahead of August Jobs Report

• U.S. Treasuries are on track for a higher start, adding to this week's gains ahead of the 8:30 ET release of the Employment Situation report for August (Briefing.com consensus 165,000; prior 114,000). Treasury futures began climbing shortly ahead of the start of the Asian session, continuing their advance until the start of European trade. Meanwhile, continued resilience in the Japanese yen briefly lifted the currency back to its August high against the dollar in the 142 area. Treasury futures held near highs for the next few hours, remaining at their best levels of the night at this time. Overnight action saw the release of a few economic reports, including disappointing July Industrial Production report from Germany (-2.4%; expected -0.4%), but the day's focus will be the August jobs report, which could give a strong boost to expectations for a 50-bps rate cut on September 18. The fed funds futures market currently sees a 41.0% implied likelihood of a 50-bps cut. Crude oil is holding just above this week's low while the U.S. Dollar Index is down 0.1% at 101.02.
• Yield Check:
  • 2-yr: -2 bps to 3.73%
  • 3-yr: -2 bps to 3.60%
  • 5-yr: -2 bps to 3.52%
  • 10-yr: -2 bps to 3.71%
  • 30-yr: -3 bps to 3.99%

• News:
  • Australia reported strong home loan growth in July a day after Reserve Bank of Australia Governor Bullock made hawkish comments about the potential need for another rate hike. 
  • Advanced technology exports to China are expected to see additional restrictions, according to Bloomberg.
  • Trading in Hong Kong was suspended due to a typhoon.
  • Japan's July Household Spending was down 1.7% m/m (expected -0.2%; last 0.1%) but up 0.1% yr/yr (expected 1.2%; last -1.4%). July Leading Index rose to 109.5 from 109.1 (expected 109.4) and Coincident Indicator was up 3.0% m/m (last -3.4%).
  • South Korea's July Current Account surplus reached $9.13 bln (last surplus of $12.26 bln).
  • Australia's July Home Loans rose 2.9% m/m (expected 1.0%; last 1.0%) and July Invest Housing Finance was up 5.4% m/m (last 2.7%).
  • Eurozone's Q2 GDP growth was revised down to 0.2% qtr/qtr from 0.3% (expected 0.3%) while the yr/yr reading was left unrevised at 0.6%, as expected (last 0.4%). Q2 Employment increased by 0.2% qtr/qtr, as expected (last 0.3%).
  • Germany's July Industrial Production was down 2.4% m/m (expected -0.4%; last 1.7%), falling 5.3% yr/yr (last -3.6%). July trade surplus reached EUR16.8 bln (expected surplus of EUR21.0 bln; last surplus of EUR20.4 bln) as imports grew 5.4% m/m (expected 0.3%; last 0.3%) and exports increased 1.7% m/m (expected 1.2%; last -3.4%).
  • U.K.'s August Halifax House Price Index rose 0.3% m/m (expected 0.2%; last 0.9%), increasing 4.3% yr/yr (expected 4.2%; last 2.4%).
  • France's July Industrial Production was down 0.5% m/m (expected -0.3%; last 0.8%) and July trade deficit reached EUR5.9 bln (expected deficit of EUR6.5 bln; last deficit of EUR6.0 bln).
  • Italy's July Retail Sales rose 0.5% m/m (expected 0.1%; last -0.2%), increasing 1.0% yr/yr (last -1.0%).
  • Spain's July Consumer Confidence rose to 89.4 from 88.4.
  • Swiss September SECO Consumer Climate fell to -35 from -19 (expected -33).
• Commodities:
  • WTI Crude: +0.5% to $69.50/bbl
  • Gold: +0.1% to $2545.80/ozt
  • Copper: +0.5% to $4.159/lb
• Currencies:
  • EUR/USD: UNCH at 1.1106
  • GBP/USD: UNCH at 1.3174
  • USD/CNH: -0.1% to 7.0828
  • USD/JPY: -0.2% to 143.06
• Data out Today:
  • 8:30 ET: August Nonfarm Payrolls (Briefing.com consensus 165,000; prior 114,000), Nonfarm Private Payrolls (Briefing.com consensus 142,000; prior 97,000), Average Hourly Earnings (Briefing.com consensus 0.3%; prior 0.2%), Unemployment Rate (Briefing.com consensus 4.2%; prior 4.3%), and Average Workweek (Briefing.com consensus 34.3; prior 34.2)